Does Google’s entry into handset territory signal a brave new world?

The launch of the T-Mobile G1 phone heralds Google’s entry into the handset market. Up until now the internet giant has been happy to squeeze the mobile versions of its services into phones via partnerships with operators and manufacturers, but the launch of Android is a large and aggressive step in a brand new direction. Why does Google want to enter the crowded mobile operating system and handset market?

Android isn’t about making Google cash by selling phones or software. The open source-based approach to developing Android and the way Google is positioning its involvement in the launch of the G1 makes this clear. Despite driving the development of Android, the device only features a low-key ‘with Google’ logo on the back. The company seems keen to make it clear that it only provides the embedded Google applications, leaving credit for the rest of the Android platform to the Open Handset Alliance, which now includes several operators, software companies and manufacturers.

Google’s Android strategy seems to be built upon entirely different commercial objectives to those that drove Apple to launch the iPhone. Apple is a box shifter. They sell user-centric, cool gadgets and software, designed to live up to a set of brand values. Any additional revenues from content services, such as iTunes or the iPhone App store, are simply a bonus.

One key reason for launching the iPhone was to protect Apple’s huge share of the MP3 player market from the advance of the converged mobile phone. Apple also hopes that droves of iPhone users will ditch their Windows-based PCs and become overnight Mac fans, thus boosting its share of the consumer computer market. So far it seems to be working.

Ad moneyGoogle’s main source of revenue is advertising. It helps companies connect with potential online customers via simple context-sensitive adverts that are integrated into its broad and growing array of services – such as its search engine, Google Maps, Gmail, and YouTube. We have all noticed the ‘ads by Google’ boxes built into our favourite blogs or the ‘sponsored links’ that appear whenever we search for something at Google.com or open an email in Gmail. As a user we get free, accessible and easy-to-use applications in return for accepting exposure to Google’s context-sensitive advertising.

Free, accessible and easy-to-use services, though not something the mobile industry falls over itself to provide, makes for happy users. This simple formula has helped Google become the top brand in the UK according to a recent Superbrands survey. Consumers trust Google more than any phone operator, phone manufacturer and even the BBC.

Given Google’s modus operandi it seems reasonable to assume that it sees huge potential for mobile advertising and, through Android, is laying the groundwork to secure a big piece of the pie. In the meantime, the big operators are standing outside the pie shop peering in through the window with one eye shut.

How big a slice can Google secure? As a point of reference, 90% of all the UK’s internet search traffic goes through Google. This means it is the gatekeepers of the UK’s online high street, with all businesses reliant on Google’s search ranking and its supplementary advertising solutions. Also, Google’s revenues are not shared with the ISPs that carry its traffic. You can create quite a cushy business model if you dominate the market and write all the rules. Mobile operators be warned.

Android is a very long way from becoming a significant player in the handset market, but the seeds have been sown and Google is setting up camp in mobile for the long haul. It’s a huge vote of confidence in mobile advertising as a viable revenue stream, but is mobile operator ambivalence going to hand Google a second monopoly at the detriment of its bottom line and consumer choice?